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Life and Death in the Econ E.R.

The financial crisis, as seen by a (necessarily anonymous) source within the Federal Reserve.

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(1) The Scariest Moment
It was when Bear Stearns went down. People had to come in on the weekend, and the SEC showed up. It was the first time the SEC and the Fed collaborated closely, but they only had like half a dozen people. Meanwhile, we had hundreds, so we dished out four bank examiners to each bank within days. My friends who don’t work in the market would say, “Yeah, Bear Stearns, whatever,” and I’m like, “It’s big, do you understand? This can’t happen. It will cause devastation.”

(2) The Talk Around the Water Cooler
We pass e-mails back and forth. Sometimes people will come up with very gloomy analysis, and sometimes it comes from the Street. You know, “Today is the worst I’ve ever seen.” Your mood changes throughout the day. You get up to go to the bathroom and get back to your desk, and it’s like, “Holy shit, what happened?”

(3) Getting Used to It
During Bear, you could see the worry in people’s eyes here. This next round, everyone was prepared. It was like, “Okay, we’re going to do Bear, then we’re going to do it every other week. We know what that looks like, we know what to tell our families, we know what to report and what to look for, we know where to get a snack at 10 p.m.” There’s less anxiety.

(4) What Not to Worry About
The $700 billion bailout, not a big deal. Get over it. I don’t know why John Taxpayer is so concerned. They don’t realize that $700 billion is kind of small. If it went through quickly, it would’ve been more effective. I guess they had to be negative at first to get the bills passed. But fear is what perpetuates this crisis.

(5) Why It’s Hard to Stop the Party
Greenspan got a lot of criticism for not pricking the tech bubble, and the same thing has happened again. It’s hard to regulate before there’s a crisis. Society prefers laissez-faire economics. People preferred that these exotic mortgages were issued first, then regulated, instead of the other way around. So we have to suffer the consequences of the bubble, time and again.

(6) Not 100 Percent Pessimistic
I’m very confident in the fact that all the central banks are coming together. Unlike the bailout, the central banks are able to move without political slowness and will make things turn around quick. People think things are going to continue to be bad forever, and they’re always wrong about that too.

(7) The Next Boom Is Under Way
One of the big Goldman partners left for Asia a couple years ago, a big strategic shift. Maybe the next boom will be there. It’s not stopping. People are working on it as we speak. The bankers will be back, they always find a way.

Have good intel? Send tips to intel@nymag.com.


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